Insured losses from natural disasters, 2005-2015. Graphic: Crain's Detroit Business

By Michael Lee
19 February 2017

(Crain's Detroit Business) – Climate change presents a knotty problem — and big risks — for insurers.

Severe weather events such as hurricanes, tornadoes and droughts are expected to occur with more frequency as the climate warms up, experts say. That presents the risk of greater losses for insurers to cover damage claims.

There were 198 natural disasters worldwide in 2015, according to the most recent annual report by Swiss Re, the most it has ever recorded, though the $28 billion in losses stemming from them was relatively low for recent years because no hurricanes made landfall in the U.S.

Though politically controversial, the notion of climate change is not controversial among insurers. The industry is working to come to grips with how to measure the risks as scientists study the effects on a world in which the five warmest years in records dating to 1880 have all occurred since 2010.

At their core, insurers are in the business of measuring and assigning a value to risk. Precisely measuring the future risk of climate change is difficult because insurers base their pricing and risk assessments on historical data. A changing climate means that data could become of less use.

"Climate change can throw a wrench into the system by causing fundamental shifts in the location, frequency, and intensity of extreme events," said Eric Robinson, senior scientist at risk-management firm AIR Worldwide in Boston. [more]

Insurance industry grapples with potential losses from climate change

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